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China moves to curb yuan's fall, but hesitantly

Beijing weighs supporting currency vs. boosting exports in trade war

The People's Bank of China imposed reserve requirements for certain forex trades on Friday, seemingly in response to currency speculators. (Photo by Akira Kodaka)

SHANGHAI -- China has stepped in to halt the yuan's sharp depreciation, but authorities must walk a fine line as a weak home currency may prove Beijing's last resort in the trade war with the U.S.

The People's Bank of China on Monday imposed a 20% reserve requirement on certain foreign exchange forward contracts, essentially making it more expensive to short the yuan. The mandate, announced Friday night, is ostensibly to hedge against risk, but the market sees the real objective as "reining in speculators becoming active at home and abroad," in the words of a trader at a second-tier Chinese bank.

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